Critical Saturation — The Underestimated Value of Building Site Density and Brand in a Small Area
Imagine what the perfect car wash might look like:
- Shielded from competition
- A household brand name, recognized when people refer to it
- Has the ability to establish recognized marketing campaigns
- Justifies a full-time maintenance person and accountant
- Multiple staff members trained in each position
- Diversified investment among several locations
- Outstanding car counts, greater return on investment
- Lower per-site overhead
These are some of the benefits that a local chain that has reached critical density possesses. Creating a brand and market domination means a greatly improved bottom line. Traveling the country, we find that many people can’t tell you the name of the wash when asked where they wash their car. They can’t tell you the name of the wash, but they can describe it and its location. Is that how it works in your town? If you ask someone in Indianapolis where they wash their car, you’ll get a resounding “Mike’s.”
CRITICAL DENSITY
Critical density usually means three to five sites in a particular market. To define market you’ll need to judge in terms of your own city, but in an average not small but not huge city, you might define it as around one site per
zip code; two to three sites per post office; or, simply in terms of population, about one 140-foot conveyorized tunnel site per 30,000 people.
An alternative and fun formula for coming up with a critical density estimate works like this: Count the number of gas stations in the market and divide by four. Add the number of McDonald’s locations; then add the number of grocery stores; then divide by four again. This should be close to the number of 140-foot conveyorized tunnels a market should have to reach critical density.
You need to be the judge on a local level for your market, but in most cases, reaching critical density means more sites in a smaller area than you’re used to or typically comfortable with. In many cases, this means only 1.5 to 3 miles between your locations.
We refer to this concept for new site developments as an “area development,” but the principle is to achieve critical mass of location saturation. By building enough locations in a small area, you are able to change the game in the local market and take control over a few key variables, while at the same time greatly increasing sales when you reach the critical penetration. “When the tide rises, all ships are lifted.”
BENEFITS
Here are some of the benefits of an area development in terms of operations:
- Divided overhead — maintenance, accounting, and admin tasks. It takes about the same overhead to maintain two sites as it does to maintain three or four.
- Brand recognition, raises all locations on your team. It’s like having permanent billboards around town; each location works like a reminder to the consumer, keeping your name out there.
- Marketing campaigns benefit all sites in the area while costing the same. Therefore, the cost is less when divided out per site.
- Coupons have more power when there are more places to redeem them.
- If you put out a good wash, and are appreciated by the customers, they will appreciate your product more when it’s offered more conveniently, and will utilize it more when they are able to get to your wash more easily — maybe one location near their work, and one near their home.
- Once you become the standard, you create strong control over the market, pricing, quality, and also define the model of car washing for the area. You can manage the competition in the area and protect yourself by being the dominant brand.
SOUND DENSE?
If you look at some of the top car wash operators and top franchise operators in the country, you’ll quickly see the use of this principle. From my personal experience we attribute our car wash success to this principle. Three of our locations in particular are located within a 2-mile diameter circle.
Two of those locations are on the same road, 1.5 miles apart. Yet, we’ve been able to achieve 600,000 cars per year between our sites within a city of 35,000 people with two other conveyor competitors.
If a competitor comes into your area and you already have critical density (they’d have to be pretty stupid if you’ve completely fulfilled the customers’ needs in the market), it’s not likely they will last since you own the market. Look at the upside: you’ll likely have an opportunity to buy their bankrupted site in about two years, thereby strengthening your empire.
When you’re researching locations, focus on mastering each market before moving forward to the next market. This usually means you should have multiple sites with the same city name in their addresses. If you’re on a good street, consider this: If you space your sites 2 miles apart, it’s likely you can serve the market well, diversify traffic patterns, and prevent someone from building in the 1-mile middle of your sites. However, say you space your sites 5 miles apart, now you’re opening the door and teasing someone to drop a location right in the middle and steal your thunder. If there’s a good site, and you don’t build there, someone else likely will.
Investors who find this concept appealing, should build a saturation plan from day one, before ever starting a first site. They must possess the capabilities and locations to build three-plus sites in the market to ensure their success. This is called an area development, and can be viewed in the same light as the requirements of most franchises or brand programs.
I know, some of you are saying, “We’ll, land is hard to find in my area and I can’t get two sites.” Maybe consider building two smaller sites. The two smaller sites are going to give you access to more customers, a diversified traffic pattern, more branding recognition, more assets in land, and more convenience for customers, meaning more sales. Maybe you can find more properties by going to an 80-foot to 100-foot system and overdo the architecture to make it look more substantial.
SINGLE-SITE SUCCESS
Home-run, single-site operations are rare, and in most cases happens either by luck, or through very hard work. Reaching critical brand density can as much as double an operator’s numbers. While most operators are afraid of cannibalizing their own site, they are leaving huge potential on the table and lacking efficiencies and security that come with having multiple sites in a small area.
Home-run sites are usually made through the development of brand dominance and mastering the market. For single-site operators, tools like custom-designed sign panels in the wash are recommended to reiterate to the customers the name and logo of the car wash they are going through. Many customers don’t know.
To rate sites and answer questions about site selection, a new free site-analysis tool is available online. It’s an amalgam of traits and demographics of top sites around the country, molded into a calculation tool that evaluates 18 key variables through a complex formula to determine the quality of a site. Careful site selection can prevent you from making a mistake.
Ryan Essenburg is COO of Holland, MI-based Tommy Car Wash Systems. For more information about area development, visit sales@tommycarwash.com. To try the free site-analysis tool, go to tommycarwash.com/sites. You can contact Ryan at (616) 494-0771 or via e-mail at ryane@tommycarwash.com.
